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US jobless claims drop to near 45-year low

Job seekers apply for the 300 available positions at a new Target retail store in San Francisco, California, on August 9, 2012 (Reuters file photo)

WASHINGTON — The number of Americans filing for unemployment benefits unexpectedly fell last week, dropping to its lowest level in nearly 45 years as the labour market tightened further, bolstering expectations of faster wage growth this year.

Initial claims for state unemployment benefits decreased 9,000 to a seasonally adjusted 221,000 for the week that ended on February 3, the Labour Department said on Thursday. Claims fell to 216,000 in mid-January, which was the lowest level since January 1973.

Economists polled by Reuters had forecast claims rising to 232,000 in the latest week. Last week marked the 153rd straight week that claims remained below the 300,000 threshold, which is associated with a strong labour market. That is the longest such stretch since 1970, when the labour market was much smaller.

The labour market is near full employment, with the jobless rate at a 17-year low of 4.1 percent. The tighter labour market is starting to exert upward pressure on wage growth.

The Labour Department reported last week that average hourly earnings jumped 2.9 per cent year-on-year in January, the largest gain since June 2009, after advancing 2.7 per cent in December.

Strong wage growth supports optimism among Federal Reserve officials that inflation will increase toward the US central bank's 2 per cent target this year. US financial markets expect the Fed will raise interest rates in March.

The Fed has forecast three rate increases for this year, but much will depend on the inflation outlook and financial conditions. The central bank lifted borrowing costs three times in 2017.

US financial markets were little moved by the claims data.

The Labour Department said claims for Maine were estimated last week. It also said claims-taking procedures in Puerto Rico and the Virgin Islands had still not returned to normal months after the territories were slammed by Hurricanes Irma and Maria.

Last week, the four-week moving average of initial claims, considered a better measure of labour market trends as it irons out week-to-week volatility, declined 10,000 to 224,500, the lowest level since March 1973.

The claims report also showed the number of people receiving benefits after an initial week of aid fell 33,000 to 1.92 million in the week that ended on January 27. The four-week moving average of the so-called continuing claims rose 12,500 to 1.95 million.

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